A nonprofit Kentucky health insurer created under Obamacare is shutting down because of staggering losses and not enough money from the healthcare law.
Kentucky Health Cooperative said Friday that it would not offer health insurance plans during open enrollment on Kentucky’s state-run marketplace. Conservatives said the shutdown is indicative of growing problems with Obamacare, as Kentucky’s co-op was the fifth to close its doors.
The cooperative, created under Obamacare to offer insurance to enrollees, said that losses started to mount and couldn’t be overcome. A big problem is that the co-op had trouble paying out claims.
“Kentucky Health Cooperative has paid millions of dollars in claims on behalf of our members,” Jennings said.
The problem is that the cooperative was popular and many of the new members hadn’t received health insurance. That led to a pent-up demand for health services, which created millions in claims, the co-op said.
In 2014, the co-op’s losses were about $50 million but slowed to $4 million in the first half of 2015, the company said.
“We were on track to reverse direction and begin operating in the black, and we expected this to come about in 2016,” interim CEO Glenn Jennings said.
But last week the co-op and other insurers found they would receive less money from the federal government this year to help pay for the sickest customers.
The federal government doled out $362 million to insurers to help cover the costs of older, sicker Americans. The reason is the risk corridor payment program didn’t bring in as much money as expected.
The payments are determined through a mathematical formula that compares claims and premiums. Last year, payment requests by issuers exceed their charges, the Centers for Medicare and Medicaid Services said.
The insurers had requested nearly $3 billion.
Kentucky’s co-op received $9.7 million, when it asked for $77 million.
The co-op said Friday that it would continue to meet its financial obligations. It serves about 51,000 members but will stop providing services Dec. 31.
The agency, which implements Obamacare, told the Washington Examiner that it is working with “Kentucky officials to do everything possible to make sure consumers stay covered.”
The agency said that it knew not all co-ops, as start-ups, would succeed and the lower risk-corridor payment for Kentucky may have led to solvency concerns. Administration officials pledged to work with insurers and co-ops that were having solvency issues.
Conservatives pounced on the shutdown, with Kentucky Sen. Mitch McConnell saying it is evidence of a “poorly conceived, badly executed law.”
“Despite repeated Obama administration bailout attempts, this is the latest in a string of broken promises,” the Senate majority leader said.
Kentucky isn’t the only state to lose its co-op. New York was forced to shut down its co-op, the largest in the nation, late last month due to financial problems.
Other states that shut down their co-ops include Iowa, Louisiana and Nevada.
